Fair Value Option (Tables)

12 Months Ended

Dec. 31, 2016

Changes in fair value under the fair value option election

The following table presents the changes in fair value included in the Consolidated statements of income for the years ended December 31, 2016, 2015 and 2014, for items for which the fair value option was elected. The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table.



	2016										2015										2014
December 31, (in millions)	Principal transactions			All other income				Total changes in fair value recorded			Principal transactions			All other income				Total changes in fair value recorded			Principal transactions			All other income			Total changes in fair value recorded
Federal funds sold and securities purchased under resale agreements	$	(76	)	$	—			$	(76	)	$	(38	)	$	—			$	(38	)	$	(15	)	$	—		$	(15	)
Securities borrowed	1			—				1			(6		)	—				(6		)	(10		)	—			(10		)
Trading assets:
Debt and equity instruments, excluding loans	120			(1		)	^(c)	119			756			(10		)	^(c)	746			639			—			639
Loans reported as trading assets:
Changes in instrument-specific credit risk	461			43			^(c)	504			138			41			^(c)	179			885			29		^(c)	914
Other changes in fair value	79			684			^(c)	763			232			818			^(c)	1,050			352			1,353		^(c)	1,705
Loans:
Changes in instrument-specific credit risk	13			—				13			35			—				35			40			—			40
Other changes in fair value	(7		)	—				(7		)	4			—				4			34			—			34
Other assets	20			62			^(d)	82			79			(1		)	^(d)	78			24			6		^(d)	30
Deposits^(a)	(134		)	—				(134		)	93			—				93			(287		)	—			(287		)
Federal funds purchased and securities loaned or sold under repurchase agreements^(a)	19			—				19			8			—				8			(33		)	—			(33		)
Other borrowed funds^(a)	(236		)	—				(236		)	1,996			—				1,996			(891		)	—			(891		)
Trading liabilities	6			—				6			(20		)	—				(20		)	(17		)	—			(17		)
Beneficial interests issued by consolidated VIEs	23			—				23			49			—				49			(233		)	—			(233		)
Other liabilities	—			—				—			—			—				—			(27		)	—			(27		)
Long-term debt:
DVA on fair value option elected liabilities ^(a)	—			—				—			300			—				300			101			—			101
Other changes in fair value^(b)	(773		)	—				(773		)	1,088			—				1,088			(615		)	—			(615		)

(a)

Effective January 1, 2016, unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected is recorded in OCI, while realized gains/(losses) are recorded in principal transactions revenue. DVA for 2015 and 2014 was included in principal transactions revenue, and includes the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality subsequent to issuance. See Notes 3 and 25 for further information.


(b)	Long-term debt measured at fair value predominantly relates to structured notes containing embedded derivatives. Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk.


(c)	Reported in mortgage fees and related income.


(d)	Reported in other income.

Difference between aggregate fair value and aggregate remaining contractual principal balance outstanding

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of December 31, 2016 and 2015, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.



	2016								2015
December 31, (in millions)	Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding			Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding
Loans^(a)
Nonaccrual loans
Loans reported as trading assets	$	3,338		$	748	$	(2,590	)	$	3,484		$	631	$	(2,853	)
Loans	—			—		—			7			7		—
Subtotal	3,338			748		(2,590		)	3,491			638		(2,853		)
All other performing loans
Loans reported as trading assets	35,477			33,054		(2,423		)	30,780			28,184		(2,596		)
Loans	2,259			2,228		(31		)	2,771			2,752		(19		)
Total loans	$	41,074		$	36,030	$	(5,044	)	$	37,042		$	31,574	$	(5,468	)
Long-term debt
Principal-protected debt	$	21,602	^(c)	$	19,195	$	(2,407	)	$	17,910	^(c)	$	16,611	$	(1,299	)
Nonprincipal-protected debt^(b)	NA			18,491		NA			NA			16,454		NA
Total long-term debt	NA			$	37,686	NA			NA			$	33,065	NA
Long-term beneficial interests
Nonprincipal-protected debt	NA			$	120	NA			NA			$	787	NA
Total long-term beneficial interests	NA			$	120	NA			NA			$	787	NA


(a)	There were no performing loans that were ninety days or more past due as of December 31, 2016 and 2015, respectively.

(b)

Remaining contractual principal is not applicable to nonprincipal-protected notes. Unlike principal-protected structured notes, for which the Firm is obligated to return a stated amount of principal at the maturity of the note, nonprincipal-protected structured notes do not obligate the Firm to return a stated amount of principal at maturity, but to return an amount based on the performance of an underlying variable or derivative feature embedded in the note. However, investors are exposed to the credit risk of the Firm as issuer for both nonprincipal-protected and principal protected notes.


(c)	Where the Firm issues principal-protected zero-coupon or discount notes, the balance reflects the contractual principal payment at maturity or, if applicable, the contractual principal payment at the Firm’s next call date.

Fair value option, structured notes by balance sheet classification and primary embedded derivative risk

The table below presents the fair value of the structured notes issued by the Firm, by balance sheet classification and the primary risk type.



	December 31, 2016								December 31, 2015
(in millions)	Long-term debt		Other borrowed funds		Deposits		Total		Long-term debt		Other borrowed funds		Deposits		Total
Risk exposure
Interest rate	$	16,296	$	184	$	4,296	$	20,776	$	12,531	$	58	$	3,340	$	15,929
Credit	3,267		225		—		3,492		3,195		547		—		3,742
Foreign exchange	2,365		135		6		2,506		1,765		77		11		1,853
Equity	14,831		8,234		5,481		28,546		14,293		8,447		4,993		27,733
Commodity	488		37		1,811		2,336		640		50		1,981		2,671
Total structured notes	$	37,247	$	8,815	$	11,594	$	57,656	$	32,424	$	9,179	$	10,325	$	51,928

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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